A Note on the Accuracy of Industrial Forecasts of the Profitability of New Products and Processes

Abstract

In making decisions about investments in new products and processes, firms must make forecasts of the profitability of alternative projects. Although several studies have been made of the accuracy of firms' estimates of R & D costs,' very little information is available concerning the accuracy of estimates of the profitability of investments in new products and processes.2 In this paper, we present detailed empirical results of this sort concerning all of the major innovations developed by one of the nation's largest firms in 1960-64. These results should be of use to both researchers and policymakers concerned with technological innovation.